This episode dissects the critical tension between Solana's powerful technical upgrades and its recent market underperformance against Ethereum, revealing a strategic divergence in network narratives.
Solana's Market Position and the SOL/ETH Ratio
- **Carlos Gonzalez Campo**, a research analyst at Blockworks, expresses surprise at Solana's recent price surge to nearly $190, especially following the Pump.fun ICO, which was expected to drain liquidity from the ecosystem.
- He attributes Ethereum's momentum to the "treasury company" and stablecoin narratives being pushed to TradFi audiences, a trend he admits to having missed.
- Carlos notes Solana's outperformance of centralized exchanges during the Pump.fun launch as a pivotal moment, signaling its fundamental strength. "You kind of saw this like pivotal moment in soul's history where like it outperformed like centralized exchanges during that moment and it kind of like signal like how good it has become like from a fundamental perspective."
The Stablecoin and Treasury Company Narratives
- Carlos concedes there is "some sort of truth to the ETH narrative," highlighting that despite Solana's technical improvements, it struggles to attract significant stablecoin liquidity compared to Ethereum.
- He provides a stark comparison: Aave on Ethereum holds over $50 billion in deposits, ranking it among the top 20 US banks by that metric, while Camino, Solana's largest money market, holds around $4 billion.
- Strategic Insight: The market is currently rewarding narratives that are simple and appealing to traditional finance (TradFi), even if they oversimplify technical realities. Solana's focus on deep technical upgrades may be less effective in the current "meme stock world."
Debating the True Value of Stablecoin Liquidity
- Carlos acknowledges the point but argues that the potential for productive use exists, even if it's not the primary use case today. He mentions that protocols like Camino are beginning to onboard tokenized equities (X-stocks), signaling a shift toward more productive applications.
- He also highlights a key trend for researchers to watch: the rise of yield-bearing stablecoins. These are stablecoins that generate a return for the holder. Carlos notes, "most of them are issued on Ethereum," citing Ethena's USDe and Maker's DAI, suggesting Ethereum maintains an edge in financial innovation in this specific area.
Analyzing Solana's Network Revenue Decline
- Carlos attributes the decline primarily to a decrease in memecoin trading, as REV is heavily driven by users paying for urgent transaction inclusion in highly contentious trading environments like Pump.fun.
- Future Outlook: He predicts a structural change in revenue dynamics with the launch of Jito's BAM, which will internalize a portion of MEV (Maximal Extractable Value) that previously went to validators. "What I think will happen is that we'll see applications earning multiples more than validators and stakers."
Jito's BAM: A New Era for Solana Transactions
- Carlos explains that BAM introduces a "plugin" architecture, similar to Uniswap's hooks, allowing applications to implement custom transaction sequencing. This unlocks new possibilities, such as prioritizing order cancellations for market makers, which is critical for building high-performance on-chain order books.
- Strategic Implication: This upgrade could enable Solana-native applications like Drift to better compete with high-volume perpetual exchanges like Hyperliquid, which currently dominate the retail trading segment. It also opens the door for privacy-focused applications like dark pools on the L1.
BAM's Impact on the SVM Chain Ecosystem
- Teams like Ellipsis Labs (launching Atlas) and the Zeta team (launching Bullet) created their own SVM chains to achieve features that were previously impossible on Solana's L1.
- Carlos questions their future edge: "It seems to me that if now it is possible to actually do this on the L1 then these kind of SVM chains lose their their edge."
- Actionable Insight for Researchers: The success of BAM could consolidate activity back onto the Solana L1, potentially diminishing the value proposition of competing SVM chains. Researchers should monitor if these projects pivot their strategies in response.
Mitigating Sandwich Attacks with BAM
- BAM offers a structural solution. By processing transactions privately within TEEs, it prevents validators from seeing transaction order flow until after it's been finalized, drastically reducing the opportunity for sandwich attacks.
- Carlos adds that BAM nodes also sign an attestation for the transaction ordering, which is broadcast to the entire network. This creates social pressure for validators to behave honestly, as any deviation from the prescribed order will be publicly visible.
Increasing Solana's Block Limit: Performance vs. Decentralization
- Carlos supports the move, noting it will lead to higher TPS and has already contributed to an all-time high in successful transactions.
- The discussion touches on the potential trade-off: increasing block sizes raises the hardware requirements for validators, which could lead to centralization. Carlos argues this is a worthwhile trade-off. "I don't think like Solana is going to be any less censorship resistant because some guy in his basement cannot run like the validator."
- Strategic Consideration: Investors should understand that Solana's core philosophy prioritizes performance to build "internet capital markets," even if it means sacrificing a degree of decentralization that other chains like Bitcoin prioritize.
Solana's Position in the Treasury Company Meta
- Carlos agrees, stating he finds the trend "incredibly stupid" and believes Solana treasury companies are unlikely to be as successful as Bitcoin or Ethereum counterparts due to market cap differences.
- He is more optimistic about the potential for a staking-enabled Solana ETF to attract meaningful institutional capital and create sustainable buying pressure.
- Both speakers view Solana's relative lack of participation in the treasury company trend as an encouraging sign, suggesting a focus on fundamental development over short-term, speculative market fads.
Conclusion
This episode reveals a clear divergence between Solana's deep technical progress and the market's current focus on simplistic, TradFi-friendly narratives. For investors and researchers, the key is to monitor whether fundamental upgrades like BAM can translate into renewed market leadership, or if Solana will need to adapt its narrative to compete.
